JakartaPost-Jan 3
Indonesia’s current account deficit will widen past pre-pandemic levels in the coming years as foreign companies repatriate profit and as the trade balance deteriorates, the World Bank has projected, which is set to put additional pressure on the rupiah. “The current account deficit widened, driven by moderating terms of trade and cyclical factors that intensified services and income outflows,” reads the World Bank’s latest report on Indonesia. Published in December, the report estimated the country’s current account deficit will rise to 0.9 percent of gross domestic product in 2024, the ceiling figure of Bank Indonesia’s (BI) latest range estimates. The World Bank expects the deficit to then balloon to 1.4 percent of GDP next year and to 1.6 percent of GDP in 2026 and 2027. Investopedia defines the current account as a record of a country’s transactions with the rest of the world that is made up of the sum of net trade in goods and services, net earnings on cross-border investments and net transfer payments. A negative current account, called a current account deficit, means the country is a net borrower. In Indonesia’s case, the cross-border trade in goods is the most significant positive contributor to the current account balance as nationwide exports exceed imports. The country has maintained a trade surplus since May 2020, with a peak of more than US$7 billion reached in April 2022. Amid high global prices for major Indonesian export commodities like coal and crude palm oil (CPO) that year, the archipelago’s current account balance logged a surplus of 1 percent of GDP in 2022, up from 0.3 percent of GDP in 2021. However, when commodity prices came down in 2023, the country slipped into deficit territory by 0.2 percent of GDP. Despite the overall surplus, Indonesia’s trade in services, as opposed to goods, has always been in deficit. The World Bank writes that last year’s rising outbound travel had widened the services trade deficit, notably as the number of haj pilgrims saw a 10 percent rise from the preceding year. Read more at:
